The largest shareowner of Canadian gas aggregator ProGas Ltd.last week stepped up to buy the rest of the producer-held companyto ensure that it remains in producer hands.

BP Amoco’s recently established Gas & Power division isbuying the remaining shares of ProGas Ltd. it does not already own.The acquisition will bring the volume of Canadian gas marketed byBP Amoco Gas & Power to 3 Bcf/d and increase its total NorthAmerican sales to 7 Bcf/d.

ProGas of Calgary, Canada’s second largest gas supplyaggregator, buys gas from about 170 producers in the WesternCanadian Sedimentary Basin and markets gas across North America. Inits most recent fiscal year, ProGas sold more than 500 Bcf, orabout 1.45 Bcf/d. ProGas claims to be Canada’s first producer-ownedgas marketer. BP Amoco currently owns two of 12 equal shares ofProGas with the remaining shares held by other producers. They areImperial Oil Resources, PanCanadian Petroleum, Mobil Resources,Union Pacific Resources, Numac Energy, Encal Energy, Wascana Energy(which has been acquired by Canadian Occidental), Home Oil Co.,Talisman Energy, and Coral Energy. Amoco acquired its second sharein ProGas when it bought Dome Petroleum in the late 1980s.

The producers earlier this year put the company up for sale, andBP Amoco was successful in the competitive bidding process. BrianFrank, vice president of BP Amoco Gas & Power, Canada, said BPAmoco was determined to see that ProGas remained under producercontrol. “It gives us expanded access to customers, both upstreamand downstream,” Frank said of ProGas.

“This is a tremendous opportunity for BP Amoco to build on acore capability, strengthen and expand our relationships withcustomers, provide for continued producer ownership and ensure acontinued prudent governance framework for ProGas,” Frank said. “BPAmoco’s strong North American gas marketing and trading capabilitywill help ensure that the full value of ProGas natural gas salesflow to producers supplying the pool.

“I think the aggregators in Canada are really evolving becausethey do have their roots in a regulated era and now they’reevolving in a more competitive and dynamic market. The role ofProGas going forward is still something we need to discuss with thepool. …[W]e certainly have designs on growing our marketing andtrading business in North America. In a Canadian context, ProGaswas an excellent fit.”

BP Amoco launched its Gas & Power business in September,said Gas & Power Chief Executive Richard Flury. “The newdivision aims to materially grow the BP Amoco Group’s gas and powerinterests in downstream markets around the world. The ProGasacquisition moves us into a position as one of North America’sleading gas marketing businesses.”

BP Amoco is North America’s largest producer and privatereserves holder of gas, producing 3.5 Bcf/d. BP Amoco affiliateAmoco Canada Petroleum Co. is the legal entity which currently ownsthe ProGas shares and will be the legal entity which will acquirethe remaining shares. The deal is to be effective Nov. 1 withclosing expected by Dec. 31.

Ken MacDonald, ProGas CEO, said he doesn’t think bringing ProGasunder the ownership of a single company will change operations muchin the immediate future. He said ProGas has grown significantlyover the last 10 years from 1988 sales of about 250 MMcf/d to lastyear’s 1.45 Bcf/d.

In 1981, ProGas had four sales customers. It now has 200. In1981 there were only 36 producer suppliers. ProGas shipped supplieson three pipelines in 1981 but now moves gas on 19.

“The BP Amoco governance framework includes audit rights anddirect producer involvement in reviewing management of the ProGaspool,” MacDonald said. “BP Amoco recognizes the importance ofcontinuity in the relationships ProGas has achieved over the last22 years with its pool producers and sales customers.”

In the first quarter of next year, ProGas expects to begincontract renewal negotiations with producers. The contract, whichincludes an incentive-based fee for ProGas, will be up for renewalin November 2000. It is expected to come up for renewal every twoyears thereafter, MacDonald said, but the door is open for a longeror shorter term.

BP Amoco Gas & Power has offices in Calgary, Houston,Boston, Chicago, and Los Angeles.

Joe Fisher, Houston

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